Betting on Business: How Family Wealth and Ethnic Capital Shape Choices and Constraints for Chinese Americans’ Entrepreneurial Pathways

Business Inheritors: Devoted and Resentful Heirs

Scholars have long maintained that most Chinese family firms are short-lived, rarely extending beyond one generation, because of the second-generation’s high levels of educational attainment, which increases their opportunities in the mainstream labor market (Wong et al. 1992). Asian immigrant business owners also prefer that their children enter high-status and high-paying jobs in the professional labor market rather than take over the family business. This line of research generally concentrates on those who own small businesses in ethnic enclaves that are labor intensive and have low profit margins, such as ethnic restaurants or small stores. We find that some Chinese immigrants also own large and lucrative businesses that defy the mom-and-pop immigrant entrepreneur stereotype. These immigrants are generally highly educated individuals who entered the US on student visas as admits to graduate programs or on work visas as recruits in top US companies.

The immigrant parents of our second-generation sample have owned their businesses for longer than two decades on average, though a few started enterprises in the last decade. These businesses emerged from an interactive process of structural opportunities in the US immigration system that prioritize high-skill immigrants, ethnic resources, including transnational connections, and structural changes in global markets that have created avenues for transnational entrepreneurship. They were initially modest ventures funded with personal savings or small loans from relatives who lived in the US or the sending country. These companies “blew up,” as one of our respondents put it, as a result of broader changes in domestic and global markets, such as deindustrialization in the US and the opening of China’s manufacturing sector. With annual sales ranging from $2 million to $24 million, these firms are typically transnational and tied to the economic marketization of China or Taiwan, often relying on familial and fictive kin networks in China and Taiwan to manufacture or import goods in demand in the US, such as promotional products, toys, vitamins, and clothing.

Only a small proportion of the parents who started these businesses have stocks, bonds, and mutual funds, and the majority of their nonbusiness assets were either liquid (that is, monetary assets) or held in real estate. As befitting the class and educational background of the parental generation, the second generation have all attained at least a bachelor’s degree from universities ranked in the top 50 nationally, with the majority graduating from campuses in the University of California system. In direct opposition to the success frame, Chinese immigrant parents who own lucrative businesses expect that one of their offspring—preferably a son—will take over the family business. This gendered expectation is not unique to Chinese immigrants as research on family succession shows that even when daughters work in the family business, sons are more likely to be chosen as successors (Ip and Jacobs 2006), but it is in line with the structure of Chinese diasporic enterprises in countries beyond the US that are generally patriarchal in nature (Zhou 2021). Of the ten business heirs in our sample, only two companies are run by women, and both are from families where they are the oldest child. Sons are generally elevated to director of operations positions whereas daughters are often relegated to hidden positions as accountants as parents slowly phase into retirement. The latter pattern is in line with studies of Chinese legacy businesses in other countries, which revolve around the family, institute a son in the top hierarchal position, and where women manage the financial side of the business (Zhou 1992, 2021).

The second generation in family legacy businesses generally do not receive exorbitant salaries—the median annual salary is $80,000. However, wealthy parents often provide their children with additional compensation that entices them to work in the business and that also builds their wealth portfolios. Parents buy their adult children homes in affluent areas of Los Angeles, such as San Marino (an exclusive suburb in the San Gabriel Valley that attracts wealthy Chinese immigrants), they pay for their luxury cars, and they also pay all of their educational expenses. This means that business heirs graduate with little or no educational debt, placing them on a more secure financial footing as they begin their adult lives. As a result, the median net worth of the business heirs in our sample is $3 million.

Heirs chart several pathways into the family business. First, in a pattern mirroring white-owned family businesses (Longenecker and Schoen 1978), parents may engage a socialization strategy, where offspring typically work in the family business as children and during college and assume leadership soon after degree attainment. The intention is that the second-generation will eventually inherit the business as parents slowly phase out. Second, some graduate college and work in white-collar occupations before deciding to join the business. Finally, some heirs intentionally delay their entry into the family business by “sowing their wild oats” in their own entrepreneurial ventures or by obtaining advanced degrees. Typically, business heirs are placed in charge of daily operations as parents transition out. Importantly, parents of this generation generally expect that the second-generation will draw on their human capital skills, social networks, and “American generational resources” (Estrada 2013)—English language fluency, social media savvy, knowledge of American institutions—to act as agents of cultural innovation (Foner and Dreby 2011) where they combine aspects of their parents’ culture with American culture to advance the business.

Regardless of the path, heirs make individual calculations about the short- and long-term rewards attached to working in professional jobs versus taking over the family business that are shaped and buttressed by family wealth. For example, some, along with their parents, view working in lucrative established family businesses as having greater economic rewards compared with white-collar jobs, especially among those who graduated college during or after the Great Recession. Some parents and adult children view the family business as a “fallback” or “safety net” when adult children seemingly underperform in education and the labor market. At the same time, these choices are also made under constraints shaped by intergenerational dynamics and familial expectations of duty, obligation, and debt adult children feel that they owe to their immigrant parents. Some relayed that they took over the firm because of a strong sense of filial duty and parental pressure despite wanting to pursue other careers. We distinguish between two types of heirs: they are either devoted or resentful.

Devoted heirs were eager to succeed their parents in part because they perceive economic returns from the established family business to be greater than what they would receive in the labor market, a rationale that became more salient during and after the recession. After graduating from a top-ten university with a degree in architecture in 2006, Gary landed an entry-level position at an architecture firm. He earned a six-figure salary, but when the Great Recession coincided with his impending marriage, he worried about his future and economic stability, especially as the real estate market crashed. He always knew that he would one day take over the family business manufacturing and distributing auto parts and the recession was the opportune time to do it. As he explained, “I was in New York, and then the whole recession thing, and I was also getting married at the time. So I thought, ‘Hey, it’s a good break to start over in a way. Hey, let’s give it a try, see what happens.’ And here we are five years later.” Gary’s risk paid off. His family’s business weathered the recession, and while he makes a relatively small annual salary of $100,000 given his company’s yearly sales of $24 million, he has amassed $10 million in stocks, bonds, and mutual funds, and he owns two properties with an estimated combined value of $750,000.

Richard also bet on the family business after a short stint in a professional position. After receiving his master’s degree at a prestigious private university in a health-related field, Richard worked as a research associate at a University of California health sciences lab with the initial goal of applying to doctoral programs. However, Richard’s father constantly asked him to take a leadership role in the family business with the expectation that Richard would soon take over the business. The deal was sealed when he was promised a $90,000 starting salary and significant long-term returns, which was far more attractive than several more years as a student followed by a job search on the competitive academic job market.

A:I just, I realized I did not want to pursue any more academic training.

Q:How come?

A:I didn’t wanna be broke for another five years. No offense. And then my father’s business was starting to take off, really take off. And then there was no one that he could fully trust to take over the daily operations. So I kinda felt like there’s an obligation for me to go back. At the same time, I’m presented with a better opportunity too.

Q:Why did you feel obligated?

A:It’s just Asian children’s sense of duty to family.

Parental wealth and the family business can also buffer against relatively low earnings potential for the second generation. In a pattern echoing research on second-generation Korean Americans who view the family business as a safety net, other devoted heirs fall back on the family business if they land jobs that their parents deem to be too low-status with low economic returns—as was the case with one respondent who was unable to find a high-paying job after graduating amid the recession. Others fall back after having sowed their wild oats with other entrepreneurial ventures. Robert exemplifies this pattern. Robert’s parents were born in Shanghai, on mainland China, but moved to Taiwan during the Cultural Revolution, where they completed college. Upon arriving in the US, Robert’s parents worked in the warehouse of a local packaging company and eventually parlayed the skills they gained into a similar business of their own, where they now net over ten million dollars a year. The packaging business is contained within a large office building with an attached warehouse and has since expanded beyond the original business. Robert’s parents own two-thirds of a factory in China, where their products are manufactured. An impressive waiting room in the front office is filled with family photos of Robert’s family with Chinese dignitaries, including the president of Taiwan. Cubicles, filled by sales staff speaking Mandarin and English, line the front room. Robert grew up in Southern California and developed a passion for import cars and, funded by his parents, he built street racing cars while in high school and college. He became well known on the national import car scene and started a magazine and other related ventures under the moniker “Chopstick Productions.” When the enterprises failed to turn substantial profits, and as he entered his thirties, Robert made the choice to fall back on his family’s lucrative manufacturing business, but also relayed that “it was the right thing to do” because it was time for him to give in to his parents’ expectations. His parents were ecstatic, as they wanted to phase out, and elevated him to the top of the organizational chain—above his older sister who had worked there for more than twenty years, and who was the backbone of the family business.

Resentful heirs often feel guilt tripped into their positions by parents who have worked extremely hard to build a successful business and now want to retire, which demonstrates the constraints under which choosing to take over a family business is made. Resentful heirs dream of pursuing careers in the professional fields and delay their entry into the family business as long as possible. When they do assume a leadership position out of duty, they harbor deep feelings of resentment that they cannot pursue their passions. At twenty-eight years old, Scott’s experience is a case in point. Scott’s heart was set on pursuing a career as a lawyer or professor. However, his parents and sisters had other plans for him. As the only son, Scott’s parents expected him to carry on their successful toy manufacturing and distribution business. His sisters also work in the family business, but in positions behind the scenes, and they pressured Scott to fulfill his duty to take over. Against his parents’ wishes, and only because one sister intervened on his behalf, Scott pursued a graduate degree in international relations, in part because he knew it would provide skills and networks that would help their transnational business, but also because it was an attempt to stall and buy time before taking over the reins. As he relayed:

Well, they weren’t so supportive of me going to grad school. My sisters just kind of convinced them. You know, “You have Scott. Just let him get it out of his system. And what’s the harm in some extra schooling?” And you know, I really wanted to be a professor. I wanted to be a lawyer. Because I just—I have no passion for toys. Like, you know, my dad yelled at me. He was like, “Well, you think I have a passion for selling toys? No, I wanted to be a journalist. I was supposed to be a news anchor, but no. Now I’m doing this. I chose this.” Because you know, like when you’re little, like your parents will give you a lot of choices, or maybe you don’t have any choice at all. So then it just seemed, you know, I was like a second generation. I wanted to choose for myself. And then you know, obviously he chose, he claims he chose to do this, so now he’s doing it, that’s his choice. Not necessarily my choice, but anyways. I ended up going to grad school, international management, because I figured I’d buy time. I think at that point I more or less was resigned, or accepted the fact that I would be in the family business.

Scott’s path illustrates how familial obligations can bind, constraining one’s choices. Having been born and raised in the US with American ideologies, Scott relayed that he feels “culturally distant” from the “Chinese people” who work in the factory in China. Scott also wanted to “follow his passion” and choose his own career path but eventually relented because he felt a sense of filial obligation to his parents and was also pressured by his sisters. Similarly, Sienna, who runs her parents’ architecture firm after graduating with a degree in architecture, as was expected of her, dreams of one day working in the entertainment industry as a screenwriter.

All of the heirs describe feeling indebted to their parents who have made the ultimate “immigrant sacrifice” of coming to the US in the name of their children’s education and mobility. But, resentful heirs give up their own ambitions and experience an intergenerational bind where they feel like they must let go of their individual desires to maintain the business that families rely on.

Ultimately, family wealth, gender, economic factors, and intergenerational dynamics shape the choices and constraints of highly educated Chinese Americans who succeed their parents in the family business. Because most members of the second generation today are still relatively young, little has been written about relations with their immigrant parents as they move through the life course (Kasinitz et al. 2009). These findings make a useful contribution to immigrant integration literature as they demonstrate that, despite high levels of economic incorporation among the American born, the larger family unit continues to shape decision-making and the economic integration of the Chinese second generation well after they transition into adulthood.

Making It Big: Family-Funded Entrepreneurs

The second ideal type describing the entrepreneurial pathways of the Chinese second generation is family-funded entrepreneurs, who have the resources to pursue start-up businesses shortly after college. These Chinese Americans tend to come from affluent backgrounds where they have access to trust funds or have wealthy parents who are willing to invest in their often risky first-time business ventures. Some of the parents of this group are business owners themselves—from transnational manufacturers to professionals with their own successful firms. In contrast to business heirs, however, some immigrant parents may not have businesses to bequeath to their children. Instead, immigrant parents with enough wealth resources often provide the financial capital for their children’s new business ventures, which broadens their children’s entrepreneurial choices. This group typically enters entrepreneurship during or straight out of college and may have a track record of small, failed ventures. Parents may support their children’s desire unconditionally or on a conditional basis after they have proven themselves through degree attainment or other measures of success, such as running a small business.

When they start their businesses, family-funded entrepreneurs benefit from direct financial support or hidden resources, or both, that pave the pathway to business. For example, some receive direct financial support in terms of seed funding and hidden support, like office space. The steady stream of parental financial support allows some in the second generation to weather the start-up phase and reach a stage of fiscal sustainability in business. Immigrant parents sometimes choose to become a coinvestor in their children’s business ventures if they see potential for future growth. This tends to be the case for second-generation Chinese Americans who are launching large-scale start-ups who need multiple rounds of funding resources.

Twenty-six-year-old Charlie exemplifies the first pattern. Charlie was born in Los Angeles but moved to Mexico along with his family as a child, where his parents operate a multi-million-dollar sneaker manufacturing enterprise. Having been born in the United States allowed Charlie to benefit from the perks of “flexible citizenship” (Ong 1999)—having the power and position to choose multiple citizenships to advance economically and socially. After having attended international school in Mexico, Charlie was able to use his US citizenship to go to college in the United States while living in his parents’ home in San Gabriel, California. Charlie attended the University of California, choosing to study economics to “groom himself” to take over the family business. However, Charlie changed his plans after attending university in the US and aimed to make his own name separate from the family business, a choice that was buttressed by his parents’ wealth, allowing him to take an entrepreneurial gamble.

Charlie’s entrepreneurial trajectory began with a costly project that failed before he was able to create a sustainable business. Charlie’s desires to start his own company separate from his father’s pushed him to take an opportunity in Taiwan with his uncle in a bakery start-up. The bakery was based in Taipei and started out with four initial locations. Charlie states that his father did not encourage him but that he viewed his uncle’s offer to partner as an opportunity to “start doing something” and gain business experience. For Charlie’s bakery start-up, his father invested $100,000 in the business. Charlie also withdrew $100,000 from his million-dollar trust fund. However, Charlie’s time in Taipei lasted less than one year because the business was starting to show signs of flopping, including the closure of two of the four branches, and because he said he did not like Taiwan. He remarks: “I guess all my friends were in Mexico and the US. I don’t know, the food … it was good at first but then after a while it’s, I couldn’t get used to it anymore. I just didn’t see a growth potential where the bakery could be like a big hit, like an international hit, so I just decided to back away from it and just do something else.”

While Charlie stayed on board as an investor, he folded his work in Taiwan and returned home. Upon returning, Charlie was able to reconnect with two of his Taiwanese American friends from college who had capital and were interested in starting up an import-export trading company. However, they were missing a marketable sales product. Charlie realized that he could rely on his experience and connections built from his family’s business by attending trade shows in China with his partners. Growing up, Charlie remembers attending trade shows in Asia with his father, accompanying him on business trips. His father had told him that it would be a great place to start looking for a trending sales item. Charlie relayed, “It was just me and one business partner at first. We just decided to work together, we didn’t know what we wanted to do. So I guess our parents suggested to us to go to Asia and try to source some products, so we decided to do that. We went to several trade shows in China … and we saw the vitamin C shower head, that was our first product. We were like, ‘Oh, let’s get into it.’ So that’s how we started.”

Charlie and his friends decided to invest in vitamin C showerheads as their main staple product “mostly because the product was unique.” With three business partners, Charlie did not have to front as much money as the bakery start-up with each partner contributing around $50,000 into a seed fund of $155,000. For his current business, Charlie pulled out another $40,000 from his trust fund and obtained $10,000 from his parents. After starting the business, Charlie’s company’s annual sales have reached $200,000 as one of the few companies that specializes in vitamin C showerheads in the country. Charlie now plans to expand his business into other types of bathroom fixtures. Charlie’s choice to follow an entrepreneurial pathway was shaped by his parents’ wealth and the leveraging of ethnic capital to seize transnational business opportunities.

Twenty-eight-year-old Nick demonstrates how parent financial capital, social capital, and educational networks meld to shape the choice to pursue business. After graduating top of his class in high school, Nick enrolled in biochemical engineering at an Ivy League college. Although he initially considered a career in medicine like his father, Nick decided against it in college because seeing his father in the profession showed him that this career path did not measure up to his standards for success (Lee and Zhou 2015). “I’ll be kind of blunt—so I realized that I could make a lot more money not being a doctor [laughter] and actually being on the business side of it, of medicine.” At the same time, Nick also did not want to work for a large company because he did not want to do the same thing “day in and day out.” As he explained, “I definitely knew I wasn’t going to go to work for a large company managing one product for ten years.”

Although Nick knew that his end goal was some kind of start-up, during college he and two of his colleagues started a tutoring business out of his dorm. Netting $150,000 per year, Nick’s tutoring company lasted throughout college and grew to being bicoastal. The business was based out of his college dorm room, where Nick and his partners recruited tutors with Ivy League degrees online or at school and managed and brokered their tutoring with their clients in both regions. At one point, they had thirty to thirty-five tutors on contract. After graduating, the partners decided to fold the business. Nick did not want to go work for a big firm, and he decided to start his own company, taking consulting jobs on the side to invest in his medical device business, a feat made possible by the hidden financial support he received from his parents, who paid his living expenses in full. Eventually, Nick met his business partners—a beta systems engineer and a neurosurgeon—through his Ivy League college network. A medical device start-up is extremely costly, with traditional medical device start-ups taking about $10 million to $15 million to get to the market. Nick and his collaborators decided to start with $4 million. After the founders put in their own round of personal funding of $10,000 each (totaling $30,000), they started the next round of funding, often referred to as FFF (friends, families, and fools). “So you go to your parents, your cousins, your rich uncle and you go, ‘I want to start this company we can put in like $50,000,’ stuff like that.” During the second round of investment, Nick’s family gave him $100,000, all while continuing to support his living expenses.

Respondents in our sample who follow this pathway of entrepreneurship directly out of college receive, on average, a $100,000 financial investment from their parents. Parental support also goes beyond providing a capital infusion or paying for living expenses. For example, one respondent’s parents used their wealth to purchase an office building so that he could have the space to run his business. Thus, parental wealth—in the form of investment capital or other resources or as a safety net—can make the choice to take a risk on business possible and easier.

Because of their frame of reference, which is highly educated parents with high levels of wealth, the risk of entrepreneurship is sometimes viewed as the way to move beyond the status of one’s parents, who have integrated into the highest echelons of the labor market or who own successful businesses themselves. And these young entrepreneurs are right. Among individuals in the US who have achieved extraordinary economic success, the self-employed are disproportionately represented (Keister 2014; Keister et al. 2021). For those who exemplify this ideal type of Chinese American entrepreneurship, class, familial wealth, and ethnic capital are pivotal to shaping their business choices.

Self-Made Entrepreneurs

The third ideal type of second-generation Chinese American entrepreneurship that emerged from our data are those who view themselves as “self-made” entrepreneurs. In contrast to business heirs or trust-fund entrepreneurs, those who claim to be self-made start different kinds of businesses depending on their pathways into entrepreneurship. First, they may be second-generation Chinese Americans who have left professional jobs to bet on business, exemplifying a form of strategic adaptation to perceived discrimination in the labor market (Lee et al. 2024; Xie and Goyette 2003). Respondents relay that they experienced a “bamboo ceiling” in professional jobs due to racial discrimination, or they perceive that they will if they were to work in corporate America. This finding is consistent with research demonstrating that while second-generation Asian Americans have attained high levels of occupational attainment, they are subject to a bamboo ceiling that prevents them from attaining high-level and lucrative corporate executive positions (Chin 2020; Huang 2021; Lu 2022, 2024; Tran et al. 2019; Lee and Zhou 2015). Self-made entrepreneurs who leave professional careers to bet on business aspire to make “big money” and they lament that their choices may be constrained because they cannot draw on parental wealth to fund their businesses. Some even saw access to familial businesses as a form of privilege that the self-made did not have. However, although this group claims to be self-made and unable to tap into parental wealth to fund their business ventures, a closer look shows the operation of hidden wealth at work that allows them to activate entrepreneurship as a form of strategic adaptation. For example, most of the parents of these Chinese Americans have college degrees, and many have advanced graduate degrees. While their parents did not have the ability to fund their business ventures, nearly all graduated without college debt, as their parents were able to fund expensive college degrees. Some of these respondents have started now lucrative import-export businesses, typically relying on ethnic capital and using personal savings to fund their ventures. Others have built professional services businesses as lawyers or business consultants after working in large firms. Other have built tech companies, funded by venture capitalists, enabled by networks forged in college.

The majority of the second-generation Chinese Americans in our sample hail from upper-middle to upper-class backgrounds, and their class position and family wealth shapes their entrepreneurial pathways. But, three of our respondents were raised in working-class or lower-middle-class families with parents who have low levels of wealth. These respondents have all attained college degrees but had dreams of entrepreneurship and self-funded their businesses. All rely on coethnics for clientele. One respondent, Peter, owns a café that sells boba drinks, a business that he started with credit cards. Another, Donna, a famed pianist, has a lucrative business providing piano and music theory lessons and college admissions services to wealthy coethnics, although she is adamant that she is very disconnected from her ancestral roots and not connected to the ethnic community. The third person, Earl, is a computer consultant who received training in computer science from a trade school after graduating from college. At age thirty-nine, Earl lives with his parents, and he claims on his website to be a multimillionaire, but he reported his net worth at less than a million dollars, attributed, in part, to the home he will inherit.